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Posted at 03:31 PM ET, 10/26/2011

Defense cuts would cost U.S. more than 1 million jobs, economist says

As the bipartisan debt “supercommittee” was meeting publicly for the fourth time Wednesday morning in the Hart Senate Office Building, the House Armed Services Committee was gathered across the Capitol campus in the Rayburn Building to examine the possible effects of the Pentagon cuts that would be enacted if the 12-member panel fails to complete its task.

The outlook: Not pretty, at least to hear one of the panel’s witnesses tell it.

George Mason University professor Stephen Fuller told the Armed Services Committee members that if the supercommittee pulls the “trigger” on hundreds of billions of dollars in cuts to Pentagon spending, the result will be the loss of more than 1 million jobs.

Fuller, who this week authored an analysis for the Aerospace Industries Association on the impact of potential cuts in procurement and research and development funding, said at Wednesday’s hearing that 10 states would suffer about 60 percent of those job losses, with California, Texas and Virginia the hardest-hit.

The brunt of the impact, he added, would be felt in sectors beyond the defense industry.

“Only about 35 percent [of the projected job losses] are in the aerospace and military equipment manufacturing sectors,” Fuller said Wednesday. “In fact, only 125,000 of those are manufacturing jobs specific to the production of these products, these military hardware. The other 65 percent are jobs on Main Street.”

Fuller’s report echoes the projections of the Pentagon, which has previously estimated that the across-the-board spending cut slated to be enacted if the debt supercommittee fails in its task would cost the United States as many as 1.5 million defense jobs and would lead to a one-percentage-point increase in the country’s unemployment rate.

The 12-member supercommittee has until Nov. 23 to draft a plan or else it will pull the “trigger” on the across-the-board cuts, which would go into effect in January 2013.

Also testifying at Wednesday’s Armed Services hearing — which was called to focus on the impact of defense cuts but wound up taking lengthy detours to other topics, particularly the rise of China — were Harvard professor Martin Feldstein, the president emeritus of the National Bureau of Economic Research; and University of Maryland School of Business professor Peter Morici, former director of economics at the U.S. International Trade Commission.

The panel’s Democrats and Republicans were largely united in warning that defense cuts would lead to devastating job losses.

“As a fiscal conservative, I tend to oppose increasing government spending for the purpose of job creation,” Rep. Buck McKeon (R-Calif.), the committee’s chairman, said in his opening testimony. “But I think we must understand that the defense industry is unique, in that it relies entirely on federal government dollars. We don’t spend money on defense to create jobs, but defense cuts are certainly a path to job loss, especially among our high-skilled workforces. There is no private sector alternative to compensate for the governments investment.”

But members differed on whether the debt supercommittee should consider the option of raising taxes in order to avoid further cuts to the Pentagon budget. McKeon has argued that tax increases should be off the table; Rep. Adam Smith (D-Wash.), the top Democrat on the panel, argued Wednesday that “increasing the amount of revenue that we have available is critical to this effort.”

“If you are concerned about the size of the impacts of the defense cuts, then you have to be prepared to make sure that there’s enough money available to make sure that you don’t do that,” Smith said. “So I believe that balance needs to be struck.”

The debt supercommittee is expected to gather next on Nov. 1 for its fifth public meeting, at which the co-chairs of two previous deficit-reduction commissions are slated to testify.

By  |  03:31 PM ET, 10/26/2011

 
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